The new enterprise will be contracted by the Government to administrate pensions for the 1.5million members of the Civil Service scheme. It is hoped it will cut costs for taxpayers, reaching annual savings of 50% by 2022, while improving the service.

Francis Maude also announced former Cabinet Minister, Lord Hutton of Furness, will be the first Chairman of MyCSP Ltd. As such, Hutton takes a leading role in the Government's plan to hand greater ownership, responsibility and power to the people running public services.

Mark Lund, the former Chief Executive of St. James's Place Capital PLC, will Chair the MyCSP Ltd Employee Partnership Trust charged with protecting the employees' interests.

Maude said: "We no longer face a binary choice between public services delivered by state monopoly and straight privatisation. That is why I am a passionate supporter of mutual, which will help Britain grow a more diverse economy.

"As a mutual, MyCSP will deliver better services for its pension scheme members, millions of pounds of savings for the taxpayer and a real sense of ownership for employees over what they do.

"We are transforming a neglected back-office operation into a new competitive and responsible business - the rest of the world is watching.

"Lord Hutton brings a real wealth of experience to his role as Chairman and I'm delighted he has accepted this role".

Lord Hutton, chairman of MyCSP, said: "I am a firm believer in the power of engaging employees to drive innovation. MyCSP Ltd builds a powerful partnership that will drive up standards and reduce costs. Providing a high quality service to scheme members will be vital to ensuring they never lose sight of the true value of their pension. I am proud to accept a role in this ambitious project."

The Equiniti Group's Paymaster business has been announced as the winner of the hotly contested tender to join the venture with a 40% stake. Paymaster brings business expertise and capital investment. The Government retains a 35% stake so taxpayers benefit as the business grows in value.

Paul Bingham, MD of Paymaster added: "The mutual model is a great idea, with a great future, and one which Equiniti Group is excited to be part of. Our experience looking after 2.9 million pension scheme members and working with more than half of the FTSE 100 makes us the ideal private sector partner in this ground breaking arrangement. We share the same desire as MyCSP to offer a fantastic service to customers and to make our mutual joint venture a template for others to come - a focus which will make this business a commercial success."